UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended September 30, 2012
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________ to__________
	Commission File Number: 333-169346

 

Global Karaoke Network, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware	26-0884454
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

1114 17th Ave., Suite 105, Nashville, TN 37212

(Address of principal executive offices)

 

(615) 495-8494

(Registrant’s telephone number)

___________________________

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [X] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[ ] Large accelerated filer	[ ] Accelerated filer
[ ] Non-accelerated filer	[X] Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [X ] Yes [ ] No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 469,440,000 as of November 15, 2012.

 

	TABLE OF CONTENTS
		Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4:	Controls and Procedures	11
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	12
Item 1A:	Risk Factors	12
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 3:	Defaults Upon Senior Securities	12
Item 4:	Mine Safety Disclosures	12
Item 5:	Other Information	12
Item 6:	Exhibits	12

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

F-1	Balance Sheets as of September 30, 2012 (unaudited) and June 30, 2012;
F-2	Statements of Operations for the three months ended September 30, 2012 and 2011 and period from September 10, 2007 (Inception) to September 30, 2012 (unaudited);
F-3	Statements of Cash Flows for the three months ended September 30, 2012 and 2011 and period from September 10, 2007 (Inception) to September 30, 2012 (unaudited);
F-4	Notes to Financial Statements.

 

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended September 30, 2012 are not necessarily indicative of the results that can be expected for the full year.

 GLOBAL KARAOKE NETWORK, INC.

(A Development Stage Company)

Balance Sheets

 

ASSETS		September 30,				June 30,
		2012				2012
CURRENT ASSETS		(unaudited)
Cash		$	98			$	637
Total Current Assets			98				637
OTHER ASSETS
Intangible assets, net			2,104				2,218
TOTAL ASSETS		$	2,202			$	2,855
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable		$	35,027			$	59,393
Loan payable - related party			65,000				25,000
Total Current Liabilities			100,027				84,393
TOTAL LIABILITIES			100,027				84,393
STOCKHOLDERS' DEFICIT
Preferred stock, $0.00001 par value, 10,000,000 shares authorized, -0- shares issued and outstanding			—				—
Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 469,440,000 shares issued and outstanding			4,694				4,694
Common stock to be issued, 91,200,000 shares			912				912
Additional paid-in capital			380,767				380,767
Deficit accumulated during the development stage			(484,198	)			(467,911	)
Total Stockholders' Deficit			(97,825	)			(81,538	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	2,202			$	2,855

 

The accompanying notes are an integral part of these financial statements.

GLOBAL KARAOKE NETWORK, INC.

(A Development Stage Company)

Statements of Operations

(unaudited)

 

										From Inception
										on September 10,
		Three Months Ended								2007 Through
		September 30,								September 30,
		2012				2011				2012
REVENUES		$	—			$	—			$	—
OPERATING EXPENSES
Professional fees			15,634				27,160				305,067
General and administrative			653				1,309				5,473
Total Operating Expenses			16,287				28,469				310,540
OPERATING LOSS			(16,287	)			(28,469	)			(310,540	)
LOSS FROM CONTINUING OPERATIONS			(16,287	)			(28,469	)			(310,540	)
DISCONTINUED OPERATIONS
Loss from discontinued operations			—				(3,254	)			(173,658	)
NET LOSS		$	(16,287	)		$	(31,723	)		$	(484,198	)
BASIC AND DILUTED LOSS PER COMMON SHARE		$	0.00			$	0.00
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED			560,640,000				469,440,000

 

The accompanying notes are an integral part of these financial statements.

GLOBAL KARAOKE NETWORK, INC.

(A Development Stage Company)

Statements of Cash Flows

(unaudited)

 

										From Inception
										on September 10,
		Three Months Ended								2007 Through
		September 30,								September 30,
		2012				2011				2012
OPERATING ACTIVITIES
Net loss		$	(16,287	)		$	(31,723	)		$	(484,198	)
Adjustments to Reconcile Net Loss to Net Cash Used in Continuing Operating Activities:
Amortization expense			114				—				164
Changes in operating assets and liabilities:
Accounts payable			(24,366	)			19,595				35,027
Net Cash Used in Continuing Operating Activities			(40,539	)			(12,128	)			(449,007	)
Net Cash Provided by Discontinued Operating Activities			—				1,094				279,461
INVESTING ACTIVITIES
Cash included in the sale of discontinued operations			—				(364	)			(364	)
Net Cash Used in Continuing Investing Activities			—				(364	)			(364	)
Net Cash Used in Discontinued Investing Activities			—				—				(1,223	)
FINANCING ACTIVITIES
Proceeds from loan payable - related party			40,000				14,000				65,000
Net Cash Provided by Continuing Financing Activities			40,000				14,000				65,000
Net Cash Provided by Discontinued Financing Activities			—				660				106,231
NET (DECREASE) INCREASE IN CASH			(539	)			3,262				98
CASH AT BEGINNING OF PERIOD			637				1,864				—
CASH AT END OF PERIOD		$	98			$	5,126			$	98
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
CASH PAID FOR:
Interest		$	—			$	—			$	—
Income Taxes		$	—			$	—			$	—
SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING ACTIVITY:
Gain on sale of subsidiaries		$	—			$	—			$	364,357
Common stock issued for license			—				—				912

 

The accompanying notes are an integral part of these financial statements.

GLOBAL KARAOKE NETWORK, INC.

(A Development Stage Company)

Notes to the Financial Statements

September 30, 2012

(unaudited)

 

NOTE 1 – THE COMPANY

 

Nature of Business

Global Karaoke Network, Inc. (the “Company”) was incorporated as MojoRepublik, Inc. in the state of Delaware on September 10, 2007. On October 1, 2008, the Company changed its name to Republik Media and Entertainment, Ltd. The Company conducted business through its two wholly-owned subsidiaries, MojoRepublik LLC and LiveBrew.com, LLC. MojoRepublik, LLC, a wholly-owned subsidiary of the Company, was organized on June 14, 2007 in the State of Nevada. MojoRepublik, LLC was in the business of developing and promoting a website, www.mojorepublik.com. LiveBrew.com, LLC, a wholly-owned subsidiary of the Company, was organized on May 23, 2008 in the State of Nevada. LiveBrew.com, LLC was in the business of organizing and promoting live events.

 

 As reported in the Form 8-K filed on August 4, 2011, effective August 3, 2011, and upon the prior approval of the Company’s board of directors and a majority of its shareholders, the Company’s corporate name was changed to “Global Karaoke Network, Inc.” Contemporaneously with the name change, the Company decided to stop pursuing its former business plans. 

 

On September 26, 2011, the Company agreed to transfer all membership units owned in its two wholly-owned subsidiaries to a former officer of the Company who is also the Company’s former majority stockholder in exchange for the assumption of all liabilities relating to the subsidiaries and for the cancellation of outstanding promissory notes.

 

On November 17, 2011, the Company’s majority shareholder sold all of his shares in the Company to an individual who now holds 82.82% of the Company’s total issued and outstanding stock.

 

On May 21, 2012, the Company entered into a license and revenue sharing agreement for an exclusive worldwide license to access, use, market and promote the Internet website MeAndMic.com as further discussed in Note 8.

 

NOTE 2 – BASIS OF PRESENTATION

 

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments (which include only normal recurring adjustments) and disclosures necessary to present fairly the Company’s financial position, results of operations, and cash flows at September 30, 2012 and for all periods presented herein.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These unaudited financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2012, filed on October 15, 2012. The results of operations for the period ended September 30, 2012 is not necessarily indicative of the operating results for the full year.

 

The Company is currently in the development stage and has not realized significant sales through September 30, 2012. A development stage company is defined as one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant.

 

NOTE 3 - GOING CONCERN

 

The Company's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The Company has incurred operating losses since inception. The Company has realized net losses from inception totaling $484,198 and has a working capital deficiency of $99,929. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 4 – INTANGIBLE ASSET

 

The Company’s intangible asset is comprised of the following on September 30, 2012 and June 30, 2012:

 

		September 30, 2012				June 30, 2012
License Agreement		$	2,268			$	2,268
Accumulated Amortization			(164	)			(50	)
Intangible Asset, Net		$	2,104			$	2,218

 

Amortization expense for the three months ended September 30, 2012 and 2011 was $114 and $-0-, respectively.  The Company’s future estimated amortization for the above intangible assets is as follows: 

 

	Year				Amortization
	2013			$	340
	2014				454
	2015				454
	2016				454
	2017				402
	Total			$	2,104

 

 

NOTE 5 – DISCONTINUED OPERATIONS

 

On September 26, 2011, the Company agreed to transfer all membership units owned in its two wholly-owned subsidiaries, MojoRepublik, LLC and LiveBrew.com, LLC, to a former officer of the Company who is also the Company’s former majority stockholder, in consideration for the cancellation of all outstanding promissory notes held by the former officer and the assumption of other liabilities related to the subsidiaries. The former officer agreed to cancel and/or assume a total of $364,721 which included accounts payable, accrued interest and notes payable. The former officer also received fixed assets which had no carrying value on the date of sale as well as the bank account of one subsidiary with cash of $364. The Company did not recognize a gain on the transaction and recognized the net book deficiency of the subsidiaries sold as an increase in the Company’s additional paid-in-capital of $364,357.

 

In accordance with ASC 205, “Presentation of Financial Statements”, the Company recorded the sale of the subsidiaries as a discontinuance of operations. As such, all results of operations related to the subsidiaries have been reclassified to loss from discontinued operations. Historical operations of the two subsidiaries have also been retroactively reclassified to loss from discontinued operations to be presented separately from results of operations from continuing operations. The statements of cash flows have been retroactively reclassified to separate cash flow activity into cash flows from continuing operations and cash flows from discontinued operations.

 

Loss from discontinued operations consisted of the following for the years ended September 30, 2012 and 2011:

 

										From Inception
										on September 10,
		For the Three Months Ended								2007 Through
		September 30,								September 30,
		2012				2011				2012
Revenues from discontinued operations		$	—			$	—			$	8,523
OPERATING EXPENSES
Professional fees			—				1,738				57,733
General and administrative			—				422				109,852
Total operating expenses of discontinued operations			—				2,160				167,585
OTHER INCOME AND EXPENSES
Other income			—				—				104
Interest expense			—				(1,094	)			(14,700	)
Total other income and expense from discontinued operations			—				(1,094	)			(14,596	)
LOSS FROM DISCONTINUED OPERATIONS		$	—			$	(3,254	)		$	(173,658	)

 

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

Various expenses of the Company as well as loans for operating purposes have been paid for or made by the Company’s sole officer and director. During the quarter ended September 30, 2012, $40,000 was advanced to the Company. Loans payable – related party total $65,000 and $25,000 as of September 30, 2012 and June 30, 2012, respectively. The amounts do not bear interest, are due on demand, and are unsecured.

 

Effective July 12, 2011, office space is provided by the Company’s sole officer and director. No rent is charged for the use of the space.

 

NOTE 7 – STOCKHOLDERS’ DEFICIT

 

Preferred Stock

The Company has designated 10,000,000 shares of the Company’s authorized capital stock as preferred stock with the Board of Directors authorized to fix the number of shares of any series of preferred stock and to determine the designation of any such series, including the authority to determine the designation of any such series, including the authority to determine the rights, preferences, privileges and restrictions on any such series of preferred stock.

 

Common Stock

On May 21, 2012, the Company entered into a license and revenue sharing agreement whereby it agreed to issue 91,200,000 shares of common stock (see Note 8). The shares were valued at $2,268 based on the estimated fair market value of the shares on the date of issuance. As of the date of the issuance of these financial statements, these shares have not been issued and have been classified as common stock to be issued on the balance sheet.

 

NOTE 8 – SIGNIFICANT AGREEMENTS

 

On May 21, 2012, the Company entered into a license and revenue sharing agreement for an exclusive world-wide license to access, use, market and promote the Internet website MeAndMic.com (the “Website”). In consideration for this license the Company will issue 91,200,000 shares of common stock. The license was valued at $2,268 based on the estimated fair market value of the shares on the date of issuance.

 

Pursuant to the terms of the Agreement:

 

	·	During the term of the agreement, the Company agrees to use its best efforts to market and promote the Website.
	·	During the term of the agreement, the parties agree to divide the gross revenues generated by the Website such that sixty-two percent (62%) of all gross revenues generated by the Website shall be paid to the Company.
	·	At any time during the term of the Agreement and up to thirty (30) days following the expiration of the agreement, the Company shall have the exclusive option to acquire all of the assets related to the Website, including the website domain and intellectual property for a purchase price of five million dollars $5,000,000. Such purchase price may, at the Company’s sole option, be paid by issuance of shares of common stock having a value of $5,000,000. The value per share issued in payment of such purchase price shall be deemed to be twenty-five percent (25%) of the market price of the Company’s common stock at the time of the closing of the purchase transaction.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

 

Company Overview

 

We were incorporated as MojoRepublik, Inc. in the state of Delaware on September 10, 2007. On October 1, 2008, we changed our name to Republik Media and Entertainment, Ltd. (the “Company” or “Republik Media” or “Republik”). As Republik, we created two wholly-owned subsidiaries, MojoRepublik, LLC and LiveBrew.com, LLC. MojoRepublik, LLC, a wholly-owned subsidiary of the Company, was organized on June 14, 2007 in the State of Nevada. MojoRepublik, LLC was in the business of developing and promoting a website, www.mojorepublik.com. LiveBrew.com, LLC, a wholly-owned subsidiary of the Company, was organized on May 23, 2008 in the State of Nevada. LiveBrew.com, LLC was in the business of organizing and promoting live events.

 

As reported in the Form 8-K filed on August 4, 2011, effective August 3, 2011, and upon the prior approval of our board of directors and a majority of our shareholders, our corporate name was changed to “Global Karaoke Network, Inc.” Contemporaneously with the name change, we decided to stop pursuing our former business plans.

 

In furtherance of our decision to stop pursuing our prior business plans, on September 26, 2011, we entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests, Assumption of Obligations and Cancellation of Promissory Notes with Mr. David Woo. The foregoing agreement transferred all membership units owned in our two wholly-owned subsidiaries, MojoRepublik, LLC and LiveBrew.com, LLC to Mr. Woo in exchange for Mr. Woo assuming all liabilities relating to the subsidiaries and for the cancellation of all outstanding promissory notes.

 

On May 21, 2012, we entered into a license and revenue sharing agreement with GT Entertainment, Ltd., a British Columbia company (“GT”), Martin Fletcher, Mark Watkins and Far East Global Trading Ltd. (“Far East”) (the “Agreement”) for an exclusive world-wide license to access, use, market and promote the Internet website MeAndMic.com (“MeAndMic”). In consideration for this license we will issue to GT 91,200,000 shares of our common stock.

 

Our Business

 

MeAndMic.com has been partially constructed. When complete it will provide immediate access to online karaoke with access to a wide range of songs for all generations. MeAndMic.com is a representative for the Karaoke World Champions (KWC). The KWC is the largest global singing competition in the world. The organization has been in existence for 10 years and has had representatives from more than 40 countries. The KWC model is to grant a single country licensee the rights to submit one male and one female contestant annually, while allowing the licensee the right to create their own selection process. This typically is a series of live venue competitions leading to a national competition.

In addition to being a representative for KWC, the website will consist of general pages, member management pages and member profile pages. The general pages will cover areas like contests, charts, and a comprehensive search engine to find other members and recordings. The member management pages will allow users to define their profile, manage media, communicate with other members, and more. Finally, members will be able to fully customize their profile page, which is their public face to other members.

 

Product/Service Description

 

MeAndMic.com has been partially constructed. When complete it will offer both “Membership” and “Contest” based services.

 

Membership Based Services

We will offer both a “Free” membership plan and a “Gold” membership plan. All members of the website will be able to create a profile including pictures, bio, fan listing, song listing, challenges / contests, media etc. All members will have full access to the dedicated communication system including direct messaging, comments, forum, and personal activity feed (similar to Facebook’s “wall”) All members will be able to download the karaoke studio application.

 

Within the Free Membership plan, users will be limited to a small subset of the MeAndMic.com karaoke track library. Additionally they will be limited to the number of tracks they can access in a given month (30 tracks) and the number of active recordings they will have under their site profile (6 active recordings). With the Gold Membership plan, users will be able to access the entire MeAndMic.com track library of over 1,000 tracks. Gold members will also have increased monthly track access (100 tracks) and active recordings (25 active recordings). Additionally, Gold members will get discounts on contest entry fees. The Gold membership will be priced at $6.99 per month with discounts for 6 and 12 month packages.

 

Contest Based Services

Online competition is an aspect that will be specific to MeAndMic.com as a social networking karaoke site. We believe that within the karaoke community there is a strong competitive tone as is illustrated by the success of programs like American Idol and X-Factor. Some singers compete for fun whereas others compete for prizes and recognition. To address these two motivations MeAndMic.com will provide a number of ways to compete:

 

·

Member Challenges: the challenge feature will allow any member to challenge another for fun and bragging rights. Winners are determined by fan votes, which will be cast by both members and non-members. Challenges will not be a direct revenue generator but given the competitive advantages of having the full library and increased song access of a gold membership, we believe that it will lend itself to increasing the free to gold member conversion ratio. Additionally as challenges are vote based, contestants could promote MeAndMic on other social media platforms by encouraging friends to come to MeAndMic to vote for their song, offering a potentially huge promotional advantage.

 

·

MeAndMic Contests: We are creating a flexible contest creation and management system that allows for the creation of a number of contest models, from entry payment models to free-entry models. Contest winners will be determined by member votes, plays, randomly, or based on judgments entered using a secure back-end system.

 

As with challenges, we believe that free contests will serve to drive traffic as well as increase the paid member conversion ratio and other social media exposure. Payment required contests would produce the obvious advantage of the entry fee, but also serve to expose the gold membership advantages to the entrant as a 30 day trial would be connected to the entry fee. The entry would give the 30 day access but also set up a recurring monthly membership payment, creating a shift from conversion to retention of the member status.

·

Third-party Contests: Given the nature of the back-end management system, MeAndMic.com will also be equipped to run contests for third-party organizations. This arrangement would be based on a revenue share situation with these partners, where MeAndMic.com would in turn be promoted in their countries.

Additionally MeAndMic has looked at other likely parties for contest services. We have found interest from radio stations, musical theatre groups, media outlets and other groups in becoming the platform to host and run online singing contests. In most cases these would be free entry based contests serving as a promotional medium for these groups, while MeAndMic.com would charge a base fee plus per entry fee over a given cap.

 

Advertising and Promotional Services

 

Although advertising streams will not initially be relied on, MeAndMic.com intends to have a number of advertising service initiatives that warrant mentioning.

 

·

Traditional Passive Advertising: like most websites, MeAndMic.com will employ banner and side advertising placements. These advertisements will be generated based on the logged user demographics as well as other information such as time of day, user location etc.

 

·

Active Advertising: the MeAndMic Karaoke Studio will have a number of key moments that force a dialog box while the user waits for an action to complete, such as downloading a track, uploading a recording or applying a given effect to a recording. These dialogs will provide the opportunity to deliver active advertisements that engage the user in some way, as opposed to the traditional passive banner advertising model. While the concept of this sort of interactive advertising is quite new, the advertising and marketing community has shown a tremendous interest in this model and studies have shown a willingness to pay a per-view premium for ads delivered in this fashion.

 

·

Promotional Packages: as mentioned above, contests can be created and packaged for the needs of a given advertising client. Models considered include a revenue share model, or a fixed rate plus activity charge model.

 

Market and Marketing

 

MeAndMic will be targeted towards karaoke enthusiasts in general but also provide a slant towards competitive singers in the vein of American Idol, X-Factor, etc. Our marketing plan revolves around using social media and radio contesting and advertising to reach our target audience, specifically Top 40 radio stations in large markets. This will be combined with ongoing fee based monthly contests for cash prizes as well as the promotion of live venue contests to directly mesh with our most likely members. Additionally our association with the Karaoke World Championships offers an ideal platform to expand to a world-wide audience.

 

Competition

 

MeAndMic’s 3 major online karaoke direct competitors are:

 

·

SingSnap.com – Ottawa, Canada

·

Red Karaoke – Madrid, Spain

·

Karaoke Channel – USA

 

SingSnap.com

 

SingSnap is the largest in terms of user base and song selection, and the most established in terms of how long they have been active. SingSnap boasts over 100,000 members, and thousands of song selections. Their record and playback system is the closest to what MeAndMic will be in terms of functionality and look, and their “community” consists of a rolling live streaming chat, forum, blog, and guestbook. SingSnap hosts theme based contests, and allows users to host their own contests as well. They market mostly through membership e-mails.

Red Karaoke

 

The second largest in terms of user base, song selection and how long they have been active is Red Karaoke. While SingSnap’s look and functionality have not changed much in the last 5 years, Red has continued to develop and grow. Originally, Red was an all MIDI (keyboard rendition) site with the lyrics displayed as a static document similar to a word document. Since then they have expanded to a dynamic karaoke machine style display and added instrumental mp3 versions of the songs for paid users. Their download system is both a paid song by song purchase and membership access, using Paypal as their commerce system. Red is the only one of the 3 to implement a Facebook application, and has dedicated its marketing structure to that.

 

Karaoke Channel

 

Karaoke Channel is the newest of the 3 main competitors, and has been growing in interest since its launch. It was built to compliment its television based sing along karaoke service, and functions much the same. They offer close to 8,000 songs. Karaoke Channel is the only one of the three to sell merchandise (i.e. logoed microphones) and have a dedicated e-commerce system. They are also partnered with the KWC USA.

 

Plan of Operations

 

We plan to market directly to the 18-54 female target demographic through advertising on social media and radio, and associating with Karaoke Jocks (KJs). With respect to social media and radio advertising, we plan to encourage people to join MeAndMic.com by promoting a contest on the website, the winner of which will receive a $1,000 prize.

 

• Social Media. Social media advertising will consist primarily of Facebook advertising. The advertising ads would only go to people who were not friends or fans of MeAndMic.com. In addition to Facebook advertising, we would also continue to utilize our YouTube, Google+, Hi5!, Nexopia, and Friendster accounts. We anticipate that the cost of the social media advertising, including the $1,000 cash prize, would be approximately $5,000 for one month of advertising.

• Radio Advertising. Most large urban areas have radio stations that target our desired demographic. In order to maintain a steady level of promotion over the course of a month, we have determined that we would like to run approximately 240 thirty second commercials promoting the $1,000 prize for winning the karaoke contest. We anticipate that the cost of advertising, including the $1,000 cash prize, would be approximately $25,000 for one month of advertising.

Our hope is that in promoting the contest, sufficient numbers of people will join MeAndMic.com to pay for the costs associated with advertising the contest and awarding the contest prize monies.

 

In addition to promoting the contest through social media and radio advertising, we also intend to promote the website by sponsoring Karaoke Jocks, venues and events. We anticipate the KJ’s will independently partner with us for the association with the name and brand. The nights they host they will have MeAndMic.com logo displayed, and give out membership promo cards as prizes. We also intend to give them discounts and first right of refusal on hosting the Canadian KWC qualifying events. For those parties that do wish to host Canadian KWC qualifying events, we will require that they purchase licenses from MeAndMic.com at a rate of $450 per venue, with discounts for multiple venues.

 

License Agreement for MicAndMe.com.

We acquired the license to use MicAndMe.com on May 21, 2012, when we entered into a license and revenue sharing agreement with GT Entertainment, Ltd., a British Columbia company (“GT”), Martin Fletcher, Mark Watkins and Far East Global Trading Ltd. (“Far East”) (the “Agreement”) for an exclusive world-wide license to access, use, market and promote the Internet website MeAndMic.com. In consideration for this license we will issue to GT 91,200,000 shares of our common stock.

Pursuant to the terms of the Agreement:

·

GT, Fletcher, and Watkins granted to us an exclusive world-wide license to access, use, market and promote the Internet website www.meandmic.com, which is owned and controlled by GT (the “Website”), and to use all patents, trademarks, copyrights, inventions, trade secrets, and know-how related to or comprising the Website (the “GT Intellectual Property”) in furtherance of such activities.

 

·

In consideration for the rights granted to us we shall issue and deliver to GT 91,200,000 shares of our common stock.

 

·

GT shall be responsible for the continuing operation of the Website and all costs and expenses necessarily incurred therein. Additionally, GT shall continue to maintain and operate the Website and shall prepare and administer all updates, programming changes, and all necessary maintenance and upgrades of the servers and other hardware necessary for its continued operation.

 

·

During the term of the Agreement, we agree to use our best efforts to market and promote the Website and give such assistance, advice and consultation to GT concerning development and improvement of the Website as we are able. All Intellectual Property developed by GT, Fletcher, Watkins, GKNI or their affiliates during the term of the Agreement relating directly to the Website shall be the sole and exclusive property of GT, but shall be included within the scope of the license granted hereunder to us.

 

·

During the term of the Agreement, the Parties agree to divide the gross revenues generated by the Website such that:

·

twenty percent (20%) of all gross revenues shall be retained by GT;

·

eighteen percent (18%) of all gross revenues shall be paid to Far East; and

·

sixty-two percent (62%) of all gross revenues shall be paid to us.

 

“Gross revenue” as used herein shall mean all revenue generated by the Website, less any required payments to music publishers and providers. In the case of contests or similar events featuring revenue sharing amongst the participants, “gross revenue” as used herein shall refer only to GT’s allocated share of entry fees or other revenue from such contests or similar events.

 

·

Within fifteen (15) business days following the end of each calendar quarter after the date of the Agreement, GT shall provide us and Far East with statements showing the gross revenue generated by the website during the preceding quarter. Within ten (10) business days following GT’s production of such quarterly statements, GT shall disburse to us our sixty-two percent (62%) share of such gross revenues and shall disburse to Far East its eighteen percent (18%) share of such gross revenues.

 

·

All current and future independent contractors of GT shall, during the term of the Agreement, continue to be deemed solely the independent contractors of GT. GT shall continue to have the sole and exclusive responsibility and liability for making all reports and contributions, withholdings, payments and taxes to be collected, withheld, made and paid with respect to its current and future independent contractors and employees, whether pursuant to any social security, unemployment insurance, worker’s compensation law or other federal, state or local law now in force and effect hereafter enacted.

 

·

During the term of the Agreement and for a period of two (2) years after any termination of the Agreement, GT, Fletcher, and Watkins shall not, anywhere in the world, directly or indirectly invest in, own, manage, operate, finance, control, advise, render services to or guarantee the obligations of any person engaged in or planning to become engaged in the same or a substantially similar business as that conducted or proposed to be conducted through the Website, provided, however, that GT, Fletcher, and Watkins may purchase or otherwise acquire up to (but not more than) five percent (5%) of any class of the securities of any person (but may not otherwise participate in the activities of such person) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Exchange Act.

 

·

At any time during the term of the Agreement and up to thirty (30) days following the expiration of the Agreement, we shall have the exclusive option to acquire all of the assets related to the Website, including the Website and the GT Intellectual Property for a purchase price of five million dollars $5,000,000. Such purchase price may, at our sole option, be paid by issuance to GT of shares of our common stock having a value of $5,000,000. The value per share issued in payment of such purchase price shall be deemed to be twenty-five percent (25%) of the Market Price (as defined herein) of our common stock at the time of the closing of the purchase transaction.

 

“Market Price” means the average of the Trading Prices (as defined below) for our common stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the closing of the purchase transaction. “Trading Price” means the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting service mutually acceptable to GT and us (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for our common stock, the closing bid price of such stock on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by GT and us. “Trading Day” shall mean any day on which GKNI’s common stock is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which our common stock is then being traded.

 

We and GT make certain representations and warranties. We and GT provide certain indemnification to the other party. The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Agreement attached as Exhibit 10.1 to the Form 10-Q filed on May 21, 2012 and incorporated herein by reference.

 

We intend to finance operations through the private or public placement of debt and/or equity securities and the reduction of expenditures. However, no assurance can be given at this time as to whether we will be able to achieve these objectives.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Results of Operations for the Three Months Ended September 30, 2012 and 2011 and the Period from Inception (September 10, 2007) until September 30, 2012

 

As a result of the sale of MojoRepublik, LLC and LiveBrew.com, LLC, the entities under which we pursued our former business plans, our operations in the financial statements are now characterized between continuing operations and discontinued operations. The continuing operations reflect our current operations. The discontinued operations reflect the historical operations that we pursued under MojoRepublik, LLC and LiveBrew.com, LLC and our prior business plans. Except as where otherwise provided, detailed below are the results from our continuing operations.

 

We reported no revenue for the three months ended September 30, 2012 and September 30, 2011 and from our inception on September 10, 2007 through September 30, 2012. 

Our operating expenses from our continuing operations for the three months ended September 30, 2012 and September 30, 2011 and from our inception on September 10, 2007 through September 30, 2012, were $16,287, $28,469 and $310,540, respectively. The expenses for the three months ended September 30, 2012 consisted of professional fees of $15,634 and general and administrative expenses of $653. The expenses for the three months ended September 30, 2011 consisted of professional fees of $27,160 and general and administrative expenses of $1,309. The decrease in professional fees from the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 is primarily attributable to the timing of the year end audit services rendered for each of the periods ended June 30, 2012 and 2011. The expenses since our inception on September 10, 2007 through September 30, 2012 have consisted of professional fees of $305,067 and general and administrative expenses of $5,473. Including losses from discontinued operations, we recorded a net loss of $16,287 for the three months ended September 30, 2012, $31,723 for the three months ended September 30, 2011 and $484,198 from our inception on September 10, 2007 through September 30, 2012.

 

As of September 30, 2012, we have insufficient cash to operate our business at the current level for the next twelve months and insufficient cash to achieve our business goals. The success of our business plan during the next 12 months and beyond is contingent upon us obtaining additional financing in order to construct, market and promote the Website. We hope to obtain business capital through the use of private equity fundraising or shareholders loans. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

 

The results of our discontinued operations are contained in the financial statements. Additionally, the notes to the financial statements include a description of the facts and circumstances leading to the disposal, the manner and timing of that disposal and the carrying amounts of the major classes of assets and liabilities included as part of a disposal group.

 

Liquidity and Capital Resources

 

As of September 30, 2012, we had total current assets of $98. Our total current liabilities as of September 30, 2012 were $100,027. We had a working capital deficit of $99,929 as of September 30, 2012.

 

Financing Activities consisted of proceeds from related party loans of $40,000 during the three months ended September 30, 2012.

 

Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

 

Off Balance Sheet Arrangements

 

As of September 30, 2012, there were no off balance sheet arrangements.

 

Going Concern

 

We have negative working capital, have incurred losses since inception, and have not yet received revenues from sales of products or services. These factors create substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.

 

Our ability to continue as a going concern is dependent on generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful in these efforts.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2012. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer (who also serves as our Principal Financial and Accounting Officer).

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer/Principal Financial and Accounting Officer, to allow timely decisions regarding required disclosure.

 

Based upon that evaluation, including our Chief Executive Officer/Principal Financial and Accounting Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of September 30, 2012 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of September 30, 2012, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending June 30, 2013: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A: Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 formatted in Extensible Business Reporting Language (XBRL).

**Provided herewith

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	GLOBAL KARAOKE NETWORK, INC.
Date:	November 19, 2012
By:	Jason Sakowski
Title:	President, Chief Executive Officer, and Director